Curbs on loans drive borrowers to higher-cost savings banks

Tighter lending restrictions at commercial banks are driving borrowers towards savings banks with significantly higher interest rates, as the government continues its efforts to curb household debt, according to industry officials. Annual interest rates on mid-interest loans for borrowers with low to medium credit scores range from 9.7 percent to 16.2 percent, which is roughly two to three times the average for comparable commercial bank loans.

In the first half of this year, savings banks issued over 491,000 such loans, up 14 percent from the second half of last year and the highest level on record, according to the Korea Federation of Savings Banks. The shift is occurring as banks tighten access to household credit, traditionally the main source of financing for consumers.

In July, KB Kookmin Bank halved the maximum mortgage available to individual borrowers nationwide to 300 million won from 600 million won, while other major lenders like Hana Bank have also restricted online lending channels.

Brief written by urgent.news from The Korea Times's own syndicated text. Machine-written — it may contain errors, so check the original before relying on it.